Why Super Micro Computer Stock Crashed 29.7% in March But Is Moving Higher in April
Key Points
Supermicro plunged 33% in a single day following news that people affiliated with the company had been charged with violating export laws.
The Justice Department brought charges against three people associated with Supermicro for allegedly selling banned Nvidia chips to China.
Supermicro wasn't directly accused of wrongdoing, but some big questions remain.
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Super Micro Computer (NASDAQ: SMCI) stock plummeted in March after one of its co-founders and two other people connected to the company were hit with smuggling charges. The California-based server specialist's shares fell 29.7% in the month, according to data from S&P Global Market Intelligence. Meanwhile, the S&P 500's level declined 5.1%, and the Nasdaq Composite's level declined 4.8%.
Supermicro saw a massive valuation decline last month following news that the U.S. Department of Justice had brought charges against people affiliated with the company for allegedly smuggling artificial intelligence (AI) chips to Chinese customers that had been banned from export. As of this writing, Supermicro stock is down roughly 61.5% from its 52-week high.
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Supermicro stock got crushed on export violation news
Supermicro stock took a massive hit on March 20 after co-founder Yih-Shyan "Wally" Liaw, sales manager Ruei-Tsan "Steven" Chang, and contractor Ting-Wei "Willy" Sun were indicted on charges of conspiring to unlawfully divert cutting-edge U.S. artificial intelligence technology to China. The company's share price plunged over 33% after the news became public servers containing $2.5 billion worth of Nvidia banned artificial intelligence chips had allegedly been smuggled to Chinese customers from 2024 to 2025.
Through inclusion in Supermicro servers that were allegedly mislabeled, the band chips were allegedly sold to a Southeast Asian company and rerouted to China in violation of the Export Control Reform Act. Four Chinese universities, two of which have ties to the military, bought the restricted Supermicro servers. On the other hand, Supermicro has not been directly named as a defendant in any related crimes.
What's Next for Supermicro?
Supermicro stock has seen some modest recovery momentum early in April thanks to bullish momentum for the broader market. The company's share price is up roughly 2.6% in the month so far amid a 3.9% gain for the S&P 500 and a 4.8% gain for the Nasdaq Composite.
Supermicro computer has seen massive sales gains in conjunction with the artificial intelligence revolution. The company's business revolves around producing pre-made servers using mostly components from third parties, with Nvidia's advanced processors being the most important piece of its hardware boxes.
Supermicro products built around these Nvidia chips for training artificial intelligence make up around 70% of the company's revenue, and the server specialist's business could be severely impacted if Nvidia chose to distance itself from Supermicro. There is no current long-term contract between the companies.
Supermicro has disclosed that an independent investigation as begun regarding Liaw, Chang, and Sun, but a definitive timetable for the investigation has not yet been set. The company has reaffirmed its commitments to U.S. export laws, but big questions regarding its future remain -- and shares could continue to be volatile in the near term.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
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